Digital Payments Adoption and the Demand for Cash: New International Evidence

Carlos Alberto Arango and Nicolás F. Suárez-Ariza
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Nicolás F. Suárez-Ariza: Banco de la República de Colombia

Borradores de Economia from Banco de la Republica de Colombia

Abstract: Even though the levels and growth rates of adoption of digital payments have reached significant figures in the recent past, the demand for cash continues to grow in both developed and developing economies across the world. This puzzle has found only partial explanations in the previous empirical literature. We bring further and more conclusive evidence that the adoption of digital payments indeed reduces the demand for cash. Yet, economic growth and lower interest rates as well as positive trends in the demand for large denomination banknotes, not explained by traditional factors, still dominate the overall growth in the demand for cash. **** RESUMEN: Aun cuando los niveles y tasas de crecimiento de la adopción de pagos digitales han alcanzado valores signicativos en el pasado reciente, la demanda por efectivo continua creciente tanto en economías desarrolladas como en desarrollo alrededor del mundo. Este acertijo solo ha encontrado explicaciones parciales en la literatura previa. Nosotros proveemos evidencia adicional y más concluyente de que la adopción de pagos digitales reduce la demanda por efectivo. Sin embargo, el crecimiento económico y las menores tasas de interés, así como las tendencias positivas en la demanda por billetes de alta denominación, no explicadas por variables tradicionales, aun dominan el crecimiento agregado en la demanda de efectivo.

Keywords: money demand; digital payments; cash; denominational structure; panel data; demanda de dinero; pagos digitales; efectivo; estructura denominacional; datos panel (search for similar items in EconPapers)
JEL-codes: E41 E42 E47 E58 (search for similar items in EconPapers)
Pages: 23
Date: 2019-06
New Economics Papers: this item is included in nep-mac and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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https://doi.org/10.32468/be.1074 (application/pdf)

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Journal Article: Digital payments adoption and the demand for cash: New international evidence (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:1074

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